I am a long term buy and hold investor who focuses on dividend growth stocks

Tuesday, June 6, 2017

This Is How This Successful Dividend Investor Turned $1,000 Into $2 Million

I love reading stories of ordinary everyday folks, who manage to accumulate a multi-million dollar fortune that is donated for a good cause. I recently read the story of the Chicago based dividend millionaire Russ Gremel, who donated $2.1 million dollar’s worth of Walgreen (WBA) stock to a wildlife refuge. Walgreen is a dividend champion, which has raised its dividends for 41 years in a row. You can read the story at the Chicago Tribune here.

Mr Gremel had accumulated the shares approximately 70 years ago, and had a cost basis of $1,000. The company kept growing and expanding over that long period of time. Mr Gremel never sold a single share during that stretch of time. Walgreen's had split the original shares to a cool 28,000 shares worth approximately $2.1 million by the time he made his donation in the past year. The amount of stock generates $42,000 in annual dividend income, which is equally impressive. In other words, the long-term investor receives his original cost basis back every single year, 42 times over. The article does not discuss whether dividends were reinvested into more stock over the years. However, using the limited amount of information available, it looks like this investment compounded at a cool 11.50%/year for 70 years. This is an impressive record. Compounding is a powerful force, especially when you stretch it over long period of time.

His investment thesis was simple, yet powerful. Mr Gremel figured people would always need medicine and women would always buy makeup. His goal was to patiently hold onto his investment in Walgreen for the long-term. In a world where the average holding period of stocks is measured in days or months, it is refreshing to see a true long-term investor who holds on to their equities for seven decades.

In the video Mr Gremel discussed how he purchased share in 10 - 12 companies, as he constantly saved at least 10% of his paycheck. He mentioned that he purchased shares for the dividends. He liked receiving a dividend check every quarter. His dividend snowball rolled into a fortune worth over $2 million over a period of 70 years.

According to The Motley Fool, Walgreen's share price has increased some 13,000% since the late 1960s. If you add in reinvested dividends, total returns jump to nearly 36,000% through the end of 2010.

Source: Capital IQ, a division of Standard & Poor's.

This unassuming man has simple tastes, and has lived frugally in the same home for nine decades. It is fascinating that he served his country during World War Two and the Korean War. In between he had a legal career, but managed to retire at the ripe age of 45 in order to do things that truly matter to him.

“But Gremel knew, even as a young man, that he didn't want to live a traditional life. He didn't want to work into his old age. He saved up, cut his standard of living and retired at the age of 45.”He told himself, "You're not going to die at 70 years of age and say, 'what if?'"His retirement has lasted much longer than he anticipated. But he's filled his time by mentoring Scouts, hiking, watching baseball games and reading. He read "War and Peace" — three times.

He mentored boy scouts, which was a successful calling for this extraordinary man. When he had a surgery, he had a never ending stream of visitors to stop by and wish him well. This is an example of a full life dedicated to the service of others, which is perhaps an even bigger accomplishment than the already impressive investment in Walgreen that compounded to $2.10 million over a period of 70 years.

• Invest in what you know
• Keep it simple
• Buy companies with competitive advantages
• Be a patient long-term investor
• Live within your means
• Live life to the fullest ( volunteer, donate to worthy causes)

The one thing that I would like to learn more about is whether he had any other investments. After all, the investment record is impressive. However, a one-stock portfolio held over a 70 year time period is a very risky move. We hear about those impressive portfolio donations to charity. However, if he had invested in another pharmacy chain such as Rite Aid, using the same thesis, he would not have fared as well for his causes. This is why I recommend that dividend investors practice extensive diversification, in order to reduce the impact on potential errors on their retirement plans.

That being said, I still find the story to be very impressive and inspirational. I am adding it to the list of the most successful dividend investors of all time. I like seeing buy and hold investors, who patiently hold on to their dividend champions for decades, letting the power of compounding do the heavy lifting for them. Everyone with a little bit of patience can build a diversified portfolio to hold for the long-run. We can all learn from this story.

Disclaimer

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